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“Dollars, dollars.” Beneath the scorching heat, scores of currency traders are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso once the voting concludes. The president has imposed a limit on the peso to tame soaring inflation and now it is overvalued and reserves are exhausted, leaving the national economy sluggish as consumers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back control of economic management from traditional elites on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Solely massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of proposing reckless spending, he lately abandoned a pledge for significant tax cuts. His second-in-command, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as planning to bring back fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader promises something unique).

Recent research from a leading journal analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in nations run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.